Not All Debt is Equal – How to Tidy Up Your Finances with Debt Consolidation

Debt Consolidation

Team MONEYME|13 October 2020| 3 min read

Financial stress is one of the most widespread stresses in Australia. It doesn’t matter what money you earn, what you’re repaying or where you live: money can be stressful to manage and when you have a lot of smaller debts sometimes it can feel like it’s hard to keep your head above water. Small debts can have a habit of accumulating almost seemingly on their own and, before you know it, you’re paying a couple of hundred dollars here and fifty dollars there every month. Small debts tend to eat into your cash flow quickly and uncomfortably and when you skip a repayment or miss a payment due to bad cash flow, not only can you get stung by compounding interest but your small debts can then also being to affect your credit file which credit providers use to assign you a credit score and ultimately decide whether you are a good or a bad credit risk.

Debt consolidation is a type of refinancing that credit customers may want to take a look at when their list of small debts has grown too large to comfortably address. It’s also a great way to tidy up your finances, even if you’re not struggling to keep on top of a bunch of small debts, and help plan for the future. Many couples, for example, might consider debit consolidation as they make plans for their future like planning for a family, to purchase a new home or to upgrade assets like cars.

The way it works is simple. You make a current list of all of the debt that you currently owe, how much is left to repay, what your monthly payment commitments are and how long you have to repay them. Things included on this list might be store credit programmes, credit cards you have, buy now and pay later arrangements, utility bills, car loan repayments, personal loan repayments, payment plans you have agreed to for other bills, etc. Make a complete and honest list of everything that you owe so that you have a clear idea of where you currently are, financially speaking. If you’re concerned that you might have missed anything then getting a copy of your credit file will help to fill in the blanks.

You can get a copy of your personal credit file from a credit reporting agency. This can be free, or you may be charged a fee for your credit file, depending on what level of information you are looking for. Your credit file will include your personal details, including your driver’s licence if you have one, and a comprehensive list of all credit currently held in your name as well as the details of past credit products that you may have had. It’s a good idea to get a copy of your own credit file at least once a year to ensure that your personal list and the credit reporting agency’s list are the same. You will want to check the credit amounts, the credit providers and the address details listed on your credit file to ensure that all of the reported credit really is yours. Identity theft will often include taking out loans and credit cards in a victim’s name and if you’re not on top of what your credit file is saying about your credit history then it’s a lot easier to fall afoul of complex credit theft issues which can sometimes take years to resolve.

Once you have a comprehensive list of everything you owe then it’s time to get a bottom figure. A debt consolidation loan is ideally a personal loan taken out for the total amount that you’re currently in debt across multiple vendors. The idea is to repay all of your smaller debts up front, killing compounding interest dead in its tracks, and then comfortably manage regular loan repayments for your consolidation loan over whatever period you have nominated. This usually results in saving money on interest charged across your smaller debts and will typically mean that your single loan repayment is actually for less than the cumulative repayments you have been making across your small debts, individually. It could even possibly include a little left over for upgrading assets like your car. Consolidation loans aren’t just for people who are struggling to contain their debt, they’re for tidying and simplifying too.

Once your smaller debts are repaid and those accounts closed, you can concentrate on planning for the future rather than simply trying to keep up with the present. A single loan repayment will help you to identify areas where you can save money for things like a home deposit, a holiday or just a rainy day. Consolidating your debts into a single, easy to understand personal loan makes it easier to see where you can make more improvements and even, possibly, where you can repay your loan more quickly and save even more money over the long term.

A consolidation loan works, however, so long as you’re honest with yourself and that you’re honest about your current financial situation. When you apply for a personal loan to cover the cost of your current small debts, always ensure that you’re completely up front about what you owe. The credit provider that you apply with will carry out a credit check as standard when they review your application. That credit application will list all of your current debt anyway so trying to hide any of your small expenses isn’t worth it. Your credit file will also list how many other applications for credit you have already made and whether or not you were successful. Denied applications for credit actually negatively affect the credit score you are awarded by money lenders so failing to list all of your debts can backfire on you over the short and the long term.

MONEYME is Australia’s online money lender who specialises in a range of credit products. You can access personal loans of up to $50,000 online in just a couple of minutes as well as apply for the Freestyle virtual credit card offering a line of credit of up to $20,000. Applying online is quick and easy and there are no early exit fees or sneaky hidden costs. MONEYME is a wholly online money lender which means they don’t have a branch office. Instead, when you make your application for a consolidation loan online with them, you are asked to electronically verify your details like your savings, income, etc. Electronic verification is instant, using the power of the internet to securely check that what you have declared is accurate, and means that approved applicants are even able to access their new funds within an hour of an approved application.

If you’re searching for ways to minimise your financial stress; ways to stop paying high interest or even compounding interest charges and ways to get out in front of your finances, once and for all, then a consolidation loan may be a personal loan product that does all of that for you. For more information about how MONEYME works or to get an idea of what you might be repaying per month on a consolidation loan, log on today. You can complete your application and use a personal loan repayment calculator to get an idea of how much freedom you might have when you consolidate your smaller debts and tidy up your finances for the future.